well my point is that there is no problem with making the payments weekly. But a rate of .5% weekly rate is way way too high. it should be about .01%- that would make the yearly rate about of about 5%. This would mean the interest payed on a loan would be closer to the cost of a lease- it should be cheaper to finance AC by loan than by lease. Every lease I have seen has been more expensive than a loan. But you then have flexibility.
I wouldn't consider a weekly rate of 0.5% too high, as it's matching your leasing rate.
But 0.01% per week equals a yearly 0.5% just btw. Might have been a typo..
I see that it is common believe among AS players that leasing is better than a loan purchase. I've that feeling that some of you only see the short term investment - calculating from week to week so to speak.
How about a comparison:
Let's say we want a 739 (62m.$), bank gives us a tied loan for 0.5%:
Leasing rate: 310,000$
Loan: 62,000,000$, 260 rates
= 238,462$ installment/week
= 155,000$ average interest/week (=40,455,000$ total interest)
Total costs of the loan purchase: 102,455,000$ after 260 weeks (5 years) - but the aircraft is ALL yours and has AT LEAST its scrap value, say 10%. So your actual costs are 96,255,000$.
Total cost of a 5-year lease: 80,000,600$ - but you've got nothing. And then? You might still need the aircraft after 5 years: The loan breaks even not later than 6 years unless you can sell your aircraft for more than scrap.
Sure a loan purchase has to be carefully evaluated as the initial interest (at 0.5%) plus installment is higher than your lease rate.
Btw, I've recently ordered 30 brand new 739 at 0.2% interest. The initial charge is only slightly higher compared to a lease and soon will drop below that of a lease and each airframe - should I really sell it at scrap after 5 years - costs me ~72m$ as opposed to 80m$ for a lease.
But I might operate them for 10 years, bearing slightly higher maint costs and a decreasing image. Costs: still 72m. The lease would have cost me 161m by then.
Of course a different calculation would be a cash bought aircraft after "saving up" for it while operating leased aircraft. But as this depends on your weekly profits it's hard to calculate.